Syria, Russia sign major offshore oil and gas exploration deal

The government of Syria has signed a major deal with a Russian company for oil and gas exploration in Syrian waters, reports Syria's state news agency SANA. Suleiman Abbas, oil minister of Syria and head of its General Petroleum Company, signed the 25 year development agreement with Russian oil and gas firm Soyuzneftegaz in Damascus on Dec. 25.

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The contract for offshore exploration in Syria will cover up to a depth of 43 miles and an area of 845 square miles between the Syrian cities of Tartous and Banyas. Projects are slated for development in several phases with total costs tentatively estimated at $90 million.

Under terms of the contract, Soyuzneftegaz will begin with surveys and studies in the area to pinpoint potential drilling sites, with this stage having an estimated cost of over $15 million. The second stage will involve drilling at least one test well, with costs estimated at over $75 million, reported SANA. If operations are successful, Soyuzneftegaz will carry out further drilling, development and production operations.

Soyuzneftegaz will be responsible for funding all the stages of the contract, and will begin operations immediately after the contract's ratification and publication, said the source.

As a part of the deal, Soyuzneftegaz will also train workers in Syria at the country's General Establishment of Petroleum.

Syria, which remains embroiled in heavy political conflict, has seen oil production drop by over 50 percent since March 2011, according to a recent country report from the U.S. Energy Information Administration. The same report highlights that as of October 2012, the direct and indirect costs of war to the Syrian oil industry stood at approximately $2.9 billion.

During the signing Abbas said the contract with Soyuzneftegaz follows up on the lucrative cooperation between Russian companies and Syrian establishments, noting that implementing the contract under current conditions in Syria will be a significant challenge.

In turn, Russia's Ambassador to Syria Azamat Kulmuhametov said the contract served as proof of the strong economic relations between Syria and Russia, noting the new deal has special importance as it comes at a time when Syria is facing arbitrary sanctions imposed by western countries and a number of other countries.

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